Business IRS Payment Plan

Business IRS Payment Plan

Your business owes back taxes.  This may include corporation or payroll taxes.  The business is unable to pay back the taxes in full, but you could pay back the taxes over time.  The IRS may agree to a Business IRS Payment Plan.

If the business can't afford the Business IRS Payment Plan then you should review IRS Tax Settlement and IRS Hardship.

Please note: A Business IRS Payment Plan will not stop penalties and interest.  Penalties and Interest will continue to accrue.

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IRS Payment Plan Step 1 – Compliance

The business must be 'compliant' before you can set up a Business IRS Payment Plan.  What does 'compliant' mean?  All business tax returns must be filed.  This includes corporation and payroll tax returns.  At least the last 2 quarters of business taxes must be paid in full.

Example: You would like to set up a Business IRS Payment Plan in the 3rd quarter for payroll taxes.  All payroll tax returns must be filed.  All taxes must be paid for the 1st and 2nd quarters.  The IRS will not accept a Business IRS Payment Plan unless the business is 'compliant' for the last 2 quarters.

IRS Payment Plan Step 2 – Types of Business Taxes

All business taxes can be included in the Business IRS Payment Plan.  It is important to understand the main business tax types.  You will want to include all the business tax types in the Business IRS Payment Plan.

Form 941, Employer's Quarterly Federal Tax Return.  Reports payroll taxes quarterly

Form 944, Employer's Annual Federal Tax Return.  Reports payroll taxes annually

Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return.  For federal unemployment taxes

Form 1120, U.S. Corporation Income Tax Return.  For C Corporations income taxes

Form 1120S, U.S. Corporation Income Tax Return for an S Corporation.  You may get a tax penalty for filing an S Corporation tax return late.

IRS Payment Plan Step 3 – Pick the Plan

Option 1: Streamlined Business IRS Payment Plan

  • Business owes less than $50,000
  • Available for C Corporation tax, S Corporation tax, and Closed Businesses with payroll tax problems
  • Not available to Open Businesses with payroll back taxes

You can request to pay back the IRS in 6 years.  If the tax balance is less than $25,000, then you do not need to provide the IRS business financial information.  If the tax balance is between $25,000 and $50,000, then you do need to provide the IRS business financial information and the payments must be automatically taken out of the business bank account.  IRS will ask you to fill out Form 433B for business information and Form 433D to set up automatic payments.

Option 2: In-Business Trust Fund Express Business IRS Payment Plan

  • Business owes less than $25,000 of payroll taxes
  • Available to Open Businesses with payroll back taxes

You can request to pay back the IRS in 2 years.  You do not need to provide the IRS with business financial information.  If the tax balance is between $10,000 and $25,000, then payments must be automatically taken out of the business bank account. Use Form 433D to set up automatic payments.

Option 3:  Regular Routine Business IRS Payment Plan

  • Business owes more than $50,000
  • Available for C Corporation tax, S Corporation tax, and Closed Businesses with payroll tax problems
  • Not available to Open Businesses with payroll back taxes

The IRS will request business financial information.  Your monthly payment amount will depend on how much the IRS thinks the business can afford.  For example, the business owes $350,000.  The IRS determines you can afford to pay $8,000 per month.  IRS will agree to a Business IRS Payment Plan for no lower than $8,000 per month.  If you are unable to afford $8,000 per month payments, you may need help negotiating with the IRS.  IRS will ask you to fill out Form 433B.

Option 4: Partial Business IRS Payment Plan

  • Any amount of taxes owed
  • Available for all types of business back taxes

The IRS will request business financial information.  The IRS will determine the payments you can afford.  For example, the business owes $125,000.  The IRS determines you can afford $900 per month payments.  IRS will agree to a Partial Business IRS Payment Plan for no lower than $900 per month.  If you are unable to afford $900 per month payments, you may need help negotiating with the IRS.  IRS will ask you to fill out Form 433B.

Please note: If you are unable to afford a Partial Business IRS Payment Plan, then consider an IRS Tax Settlement (Offer in Compromise). An IRS Tax Settlement may be more difficult to get if the business is still operating.  Review this option with an experienced tax professional.


Individual IRS Installment Agreement

Individual IRS Installment Agreement

You owe back taxes. If you do not have the money now and you need some time to pay back the taxes, you can request an IRS Installment Agreement.

If you can't afford the IRS Installment Agreement payments then you should review IRS Tax Settlements (Offers in Compromise) and IRS Hardship.

Please note: An IRS Installment Agreement will not stop penalties and interest. Penalties and interest will continue to accrue.

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IRS Installment Agreements – 5 Types

There are 5 types of IRS Installment Agreements. The different types depend on the amount of taxes owed.

Type 1: $0 – 10,000 of Taxes Owed
You can request a Guaranteed IRS Installment Agreement. The IRS will agree to payment terms for up to 3 years (36 months). You don't need to provide personal information to the IRS.

Type 2: $0 – 25,000 of Taxes Owed
You can request a Streamline IRS Installment Agreement. The IRS will agree to payment terms for up to 6 years (72 months). You don't need to provide personal information to the IRS.

Type 3: $25,000 – 50,000 of Taxes Owed
You can request a Streamline IRS Installment Agreement. The IRS will agree to payment terms for up to 6 years (72 months). You do need to provide personal information to the IRS. Also, IRS Installment Agreement payments must be automatically taken out of your personal bank account. The IRS will request that you fill out Form 433A or Form 433F to report personal information. Form 433D is used to set up automatic payments.

Type 4: Owe More Than $50,000 of Taxes
You can request a Regular IRS Installment Agreement. The IRS will ask you to provide personal financial information. Your monthly payment amount will depend on how much the IRS thinks you can afford. For example, you owe $75,000. The IRS determines you can afford to pay $2,000 per month. IRS will agree to an IRS Installment Agreement for no lower than $2,000 per month. If you are unable to afford $2,000 per month payments, you may need help negotiating with the IRS. The IRS will request that you fill out Form 433A or Form 433F to report personal and financial information.

Type 5: Any Amount of Taxes Owed
You can request a Partial Payment IRS Installment Agreement if you are unable to afford the other IRS Installment Agreement types. The IRS will ask you to provide personal and financial information. The IRS will determine the payments you can afford. For example, you owe $50,000. The IRS determines you can afford $250 payments. The IRS will agree to an IRS Installment Agreement for no lower than $250 per month. If you are unable to afford $250 per month payments, you may need help negotiating with the IRS. The IRS will request that you fill out Form 433A or Form 433F to report personal and financial information.

Please note: If you qualify for a Partial Payment IRS Installment Agreement, then you may qualify for an IRS Tax Settlement. We recommend an IRS Tax Settlement over a Partial Payment IRS Installment Agreement. A Partial Payment IRS Installment Agreement can last for 8 to 10 years. You can pay an IRS Tax Settlement in 5 to 24 months.

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IRS Installment Agreement Monthly Payment Amount

There is an easy way to estimate the monthly payment amount. You owe $30,000. You want to see if you can afford Type 3, IRS Streamline Installment Agreement. You want to pay back the taxes over the next 6 years. This is how you estimate the monthly payments.

There are 72 months in 6 years. Divide the total taxes owed by 72 months. Then multiply the result by 1.2: $30,000 / 72 months x 1.2 = $500 per month. The IRS will accept a $500 per month IRS Streamline Installment Agreement.

3 Ways to Make IRS Installment Agreement Payments

1) By mail – Payments by mail should be made payable to U.S. Treasury. On the memo line of your check write your social security number, tax form, and years owed. Tax form for personal tax returns is 1040. Tax form for trust fund penalties is CivPen. Payments should be made 10 days before the payment is due to allow for processing time. Mail payments to: Department of Treasury, Internal Revenue Service, Kansas City, MO 64999-0010

2) Online – You can register for the Electronic Federal Tax Payment System EFTPS program to make the payments online. It takes about 2 to 3 weeks to set up an EFTPS account.

3) Automatic Debit – The payments can be automatically taken out of your bank account. The IRS will ask you to fill out Form 433-D, Installment Agreement, with your bank routing and account numbers. It may take the IRS 30 to 60 days to set up the automatic debit. The IRS will notify you when the automatic debit is set up. You may need to mail in payments for the first two months while the IRS is setting up automatic payment.

Paying IRS Early and Tax Refunds

You can pay extra. Paying extra will not increase your monthly payment amount. It will reduce the number of monthly payments you make under the IRS Installment Agreement.

The IRS will take your future tax refunds. The IRS will apply your tax refunds to back taxes owed. This will reduce the number of monthly payments you make under the IRS Installment Agreement.

If you owe back taxes and you cannot pay in full, we recommend requesting an IRS Installment Agreement. The IRS Installment Agreement will not reduce the taxes you owe. The agreement will give you time to pay back the taxes. If you are unable to afford the IRS Installment Agreement payments, then consider requesting an IRS Tax Settlement (Offer in Compromise) or IRS Hardship.


Tax Resolution

Tax Resolution Services

Dealing with IRS or state tax problems can feel overwhelming. You may feel afraid to ask for tax help, but we want you to know that you are not alone. The common misconception is your tax problem is beyond help. This is far from the truth: we will help you resolve your tax problems by finding a solution that you can afford and that the IRS or State of Michigan will agree with.

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Select a Category for Customized Tax Information:

Whether you received a large tax bill that you cannot afford, you owe back taxes to the IRS or State of Michigan, or you are worried about IRS or State of Michigan liens and levies, we can find a tax solution or you. There is no one solution to all tax problems, but we will take the time to get to know your situation and find the tax solution that works best for you. Our team has extensive experience handling complex tax resolution cases for individuals, businesses, and self-employed individuals in the State of Michigan and throughout the United States.

Read through our informational pages to learn about the tax resolution options that may be available to you. If you have any questions about our tax resolution services, feel free to contact us. Your consultation is free, and we will make some suggestions to help you fix your back taxes.


Testimonial

ALG Tax Solutions can help you when it seems that there are no options or no one to help.  We pride ourselves on getting you through the toughest tax problems.  This is a testimonial from one of our client’s John.  Continue reading…


IRS New "Fresh Start" Program works!

Earlier this year the IRS announced the “Fresh Start” program.  The IRS implemented this program to provide relief to struggling taxpayers.  I discussed the need for program in my blog posting, “IRS Overwhelmed by Offer in Compromise Requests, Changes Made.”  I must admit that I was a little skeptical of this program in the beginning.   But now I am a believer.
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IRS Fiscal year 2011 Data Book

The IRS issued their fiscal year 2011 Data Book.  The 2011 Data Book provides a snap snapshot of agency activities for the year.  For example, the IRS collected $2.4 trillion and processed more than 234 million tax returns.  Below are some interesting statistics related to tax resolution.

82% of annual individual tax returns selected for audit resulted in a change.  On average, the changes made resulted in about $11,000 of additional taxes per return.

71% of annual business tax returns selected for audit resulted in a change.  On average, the changes made resulted in about $850,000 of additional taxes per return.

30% of the annual individual income tax returns selected for audit claimed the Earn Income Tax Credit (EITC).

The IRS Substitute for Return program resulted in $14.4 billion of additional taxes.

The IRS assessed $31 billion in penalties.  The IRS abated $11 billion in penalties.

On average, 34% of individual penalties were abated and 44% of business penalties were abated.

There were 59,000 Offer in Compromises (settlements) filed.  33% of the offers submitted were accepted.

IRS issued 3.7 billion levies.  This is an increase of 4% compared to 2010.

If you need relief from the IRS, ALG Tax Solutions, P.C. can help.  Call us at 855-MI-TaxHelp. (855-648-2943)

IRS Circular 230 Disclosure: To the extent this writing contains advice on a federal tax issue, the advice is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.


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Do not let your taxes snowball out of controll (Part One)

I have helped a considerable number of clients resolve their back taxes.  One thing that surprises most of my clients is the sheer amount of taxes, interest, and penalties owed.  How do people get into this situation?  Owing taxes can be compared to a snowball that starts to roll from the top of a hill and gets increasingly larger as the snowball progresses down the hill toward the bottom.  Given a long ride, that snowball gets too big to handle.  The following narrative, which includes name and location changes to protect client confidentiality, demonstrates how back taxes can erupt out of control. Continue reading…